Fresenius has mandated Deutsche Bank, J.P. Morgan, Societe Generale, Credit Suisse, and Unicredit to arrange and underwrite the financing to support its €3.1 billion acquisition of Rhoen-Klinikum.
The financing will encompass a syndicated loan, bond, and an equity instrument of up to €1 billion, and will see Fresenius’ net-debt-to-EBITDA ratio exceed 3x in 2012, though remain under 3.5x, before returning to the upper end of its target range of 2.5-3x in 2013.
Fresenius is paying €22.50 a share for Rhoen-Klinikum, which is a 52% premium to the firm’s closing share price on April 25, and 53% higher than the weighted average share price over the past three months. The German healthcare group intends to combine Rhoen-Klinikum with its HELIOS division to create Germany’s largest private hospital group, with approximately €6 billion in sales.
In terms of financing Fresenius is an experienced borrower, through the Fresenius SE parent company and Fresenius Medical Care subsidiary, both of which are listed. In March this year the firm placed a €500 million issue of seven-year notes to fund acquisitions and refinancing. This followed a $1.2 billion and $250 million three-part bond placing in January, that funded Fresenius Medical Care’s acquisition of Liberty Dialysis.
The group is a seasoned loan borrower, and maintains a large relationship banking group. Fresenius also has an institutional following, having syndicated a $996 million and €162.5 million cross-border TLD in March last year. The Medical Care division signed a $2.55 billion oversubscribed TLA and revolver A-to-E in September 2010, through an all-bank syndicate. Sources say any new loan financing is likely to call on existing lenders.
As well as announcing the acquisition, Fresenius has raised its results outlook for 2012. Based on preliminary first-quarter figures, the group said sales had increased by 13% (10% in constant currency) to €4.42 billion, from €3.92 billion in the same period last year. Group EBIT rose by 15% (12% in constant currency) to €661 million from €575 million, while group net income was up by 18% (15% in constant currency) to €200 million from €170 million.
Of the group’s four divisions, Medical Care is the largest, with sales growth of 9% (10% in constant currency) to $3.25 billion. EBIT, meanwhile, rose by 13% to $503 million.
In light of the stronger-than-expected results for the first quarter, Fresenius has raised its full-year guidance. The firm now expects net income of 12-15% from 8-11% (in constant currency). Sales growth of 10-13% is now projected in the upper end of the targeted range. The first quarter’s final figures will be provided on May 3, as originally scheduled.
In response to all this news, Fresenius’ bonds were largely unchanged. The 8.75% notes due 2014 bracket 116.25, according to sources, who added that the 5.5% notes due 2016 are at 105.75, and the 4.25% bonds due 2019 are at 101. These bonds do not trade frequently in the secondary, as many are held by German retail accounts.
In the equity market, however, investors had marked down Fresenius SE & Co stock a little over 5% by late morning, at around €69.80 per share.
Fresenius is a global health care company with products and services for dialysis, the hospital and the medical care of patients at home. – David Cox/Sohko Fujimoto